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Ward Distribution Company has determined its December 31 inventory on a LIFO basis at $200,000. Information pertaining to that inventory follows: Estimated selling price $204,000 Estimated cost of disposal 10,000 Normal profit margin 30,000 Current replacement cost 180,000 Ward records losses that result from applying the lower-of-cost-or-market rule. At December 31, the loss that Ward should recognize is O $20,000 O $14,000 O $0 O $6,000

Sagot :

Because the $180,000 market value is $20,000 lower than the $200,000 historical cost, the inventory should be valued at $180,000 and a $20,000 loss recognized.

What is market value?

The cost that an asset would fetch on the open market or the assessment that the financial community makes of a particular equity or company is known as market value, often known as OMV or "open market valuation."

Market value is another name for a publicly traded company's market capitalisation, which is calculated by dividing the quantity of outstanding shares by the current share price.

It is simplest to determine market value for exchange-traded products since their market values, such as those for stocks and futures, are well-known and accessible. However, determining market value for over-the-counter assets like fixed income securities might be more challenging.

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